Real Estate News

MUMBAI: LIC Housing Finance Asset Management Company , a unit of LIC Housing Finance, which figured in the bribes-for-loan scam, is planning a Rs 750-crore real estate fund and is looking for people to manage it.

The company is considering senior executives from Mumbai-based Edelweiss Securities and realtor Tishman Speyers for top positions and candidates from Trikona and realty fund IndiaREIT for the midmanagement level, according to people involved in the recruiting process.

LICHFL Asset Management will raise Rs 500 crore with a greenshoe option of Rs 250 crore through co-sponsors LIC and LIC Housing Finance, who will put in about 20% of the corpus.

"The aim is to tap middle income housing opportunities," LICHFL Asset Management CEO Arun Goel told ET. "Recruitment is an ongoing process and we will build on the team once the fund is closed and we get into investing."

Goel said his company had factored in the 2008 crash and the more recent bribes-forloan scam while deciding to launch the fund. He said the fund would target a 22% return.

Nowroz Building, a
century-old residential building near Girgaum Chowpatty
has been bought by Pune-based developer Avinash Bhosale
for Rs 150 crore.

MUMBAI: A
century-old residential building in the heart of south Mumbai was
purchased by Pune-based developer Avinash Bhosale for Rs 150 crore. The
four-storied Nowroz Building on Hughes Road near
Girgaum Chowpatty was built at the turn of the last century and is a
tenanted, cessed property.

Bhosale
confirmed the deal. Speaking to TOI, he said he recently signed an MoU
with the owner, Ethix Realtors, belonging to Pune's Gathani family. The
building has a heritage facade, but is in a decrepit condition.

It will be demolished to give way to a
high-end residential apartment block, said Bhosale. He is believed to be
politically connected and has wide business interests, including
hospitality, infrastructure and construction. This will be Bhosale's
first project in south Mumbai.

The
deal comes at a time when redevelopment of cessed properties like Nowroz
(constructed prior to 1940) in the island city has slowed down
considerably for various reasons. "Tenants are no longer willing to
settle for anything less and are demanding larger flats in the
redeveloped properties. Some builders, for the first time, are giving
bigger flats to existing tenants," said a prominent south Mumbai
property redeveloper.

Nowroz
Building situated on a 1,061 sq m plot had over a dozen tenants
occupying spacious flats. The original landlord, Kathawala, then sold it
to the Gathanis.

A year ago,
Gathanis sold it to Mumbai-based Kanakia Developers and HDFC
Portfolio Management Services who were supposed to develop it
jointly.

However, the deal fell
through because of various issues and Ethix put the building back on the
block some time ago. Sources said the tenants were bought out and the
building is now completely vacant. "About Rs 50-60 crore was paid to get
the tenants out," they said.

The
building is a cessed property, but falls in the Coastal
Regulation Zone ( CRZ )). So, it will not be
able to avail of any incentive floor space index (FSI) that is generally
available for such tenanted redevelopment projects in the island city.

In perhaps the largest
land transaction beyond Bandra, a seven-acre plot in Andheri (East) was
sold for around Rs 800 crore last week. The 30,000 sq m Popular
Car Bazar on Andheri-Kurla Road, owned by Mumbai-based real
estate company HDIL, sold it to the Kanakia Group a
few days after Christmas last month.

The land once belonged to the Thakur family, which sold it to HDIL
two years ago for over Rs 400 crore. It was earlier used as a
garage. Today , about 20% of the plot is covered by slums. Kanakia is
likely to get about seven lakh sq ft to develop here. Sources say the
Kanakia Group already has a large commercial project adjoining Popular
Car Bazar, and it made sense to take it over.

The Kanakias own the Mariott Courtyard hotel in the vicinity.
The new plot they have acquired is also along the upcoming metro line.
The group plans to set up a new commercial project . Commercial rates in
this area are around Rs 15,000 to Rs 20,000 per sq ft.

Property experts described this as the largest land deal in
the distant suburbs in recent times. The city witnessed several big land
transactions last year, but most were either in the island city or up
to Bandra.

In April 2009, city-based developer Wadhwa Group paid a little over Rs 1,000 crore to Reliance Industries Ltd (RIL)
to develop a 2.5-acre plot (C-66 ) in Bandra-Kurla Complex
(BKC). RIL had purchased the plot for Rs 918 crore through a bidding
process in 2007.

Early in 2010, the
Wadhwa Group had paid Rs 570 crore for the 18-acre Hindustan Composites
land in Ghatkopar . A six-acre government plot in Wadala also fetched
the highest bid of Rs 4,053 crore from the Lodha Group
last year, setting an all-India record and reaffirming Mumbai’s numero
uno position in the property market.

Mumbai: Planning to
take a home loan? Be prepared to shell out double-digit interest rates
soon. Lenders say it’s only a matter of time before they are forced to
pass on the higher cost of funds to borrowers after the Reserve Bank of
India increased key policy rates by 25 basis points on Tuesday. The
rate hike, the seventh successive one since January 2010, is aimed at
controlling inflation which the RBI described as a “dominant concern”.
The rate of inflation as measured by the wholesale price index is now
forecast to be at 7% by end-March, much higher than the original estimate of 5%. At
present, new borrowers get loans at close to 9.5%. But borrowers who
have availed of home loans around five years back are already paying
over 12% following successive increases in prime lending rates. The increase in policy rates may seem modest. But banks are already in deficit mode and borrowing over Rs 1lakh crore from RBI on a daily basis. “The
liquidity situation is very tight and the cost of funds has gone up for
all. Interest rates on home loans would also go up to double digits,”
said HDFC chairman Deepak Parekh. He pointed out that top corporates
were already borrowing at double digits. Slow down lending: RBI to banks Higher interest rates should be good news for depositors, though rates
at which it lends to and borrows from banks — to 6.5% and 5.5%
respectively. According to bankers, the 25 basis point hike was a
moderate step and by itself not disruptive to growth. Most banks were
expecting that the central bank would take further measures to ease
liquidity. Many in the financial sector expected the rate hike to be in
the order of 50 basis points. “Going forward, higher demand-side
pressures emanating from generalized inflation are likely to surface. their
enthusiasm for fixed deposits is likely to wane since inflationary
expectations could discourage savings. Rising interest rates could also
restrain real estate prices in the medium term by tempering demand. Unveiling its quarterly monetary policy review, the RBI on Tuesday hiked the repo and reverse repo — the Not
taming inflation could act as an impediment to the economy’s 8-9%
medium term growth rate objective,” said Ajay Srinivasan, chief
executive, financial services, Aditya Birla Group. What ought to
worry borrowers is that RBI has told banks in no uncertain terms that
they must slow down lending. The biggest concern for the central bank
now is that in the third quarter, banks have lent more money than they
raised in the form of deposits.

The housing and real estate sector in India
witnessed foreign direct investment (FDI) of $2.8 billion in the fiscal
year (April-March) 2009-10, according to indian Department of Industrial
Policy and Promotion. According to stats reavealed at IndiaHome
property exhibition, which concluded in Dubai on Sunday, total NRI FDI
inflows through the period April-December 2009-10 stood at $320.05
million. The housing and real estate sector including cineplex,
multiplex, integrated townships and commercial complexes etc, attracted a
cumulative FDI of $ 8.4 billion from April 2000 to March 2010, the
department said.

Growth is catalysed by the leading cities of India like Delhi, Mumbai
and Bangalore, with capital values appreciating 2-5 per cent across the
markets. Saru Kaushal, business manager mortgages of Citibank, which
presented the IndiaHome exhibition, said that the property market growth
of eight to ten per cent has attracted NRIs who want to invest part of
their wealth back home in their first, second or retirement home.
Townships and integrated-community developments have emerged as
preferred investment destinations.

“One interesting thing is that all cities in India are developing
with self sufficient localities within the cities so that residents do
not have to travel long distances as they find residential, commercial
and other facilities within close proximity,” Saru said. The leading
real estate developers of India, pioneering the concept of integrated
lifestyle community developments have found ready clients with the
liquidity rich NRIs.

Harmit Chawla, vice president sales and marketing, Paras Buildtech
India, said that supply runs far short of demand. He said that there
were only 30,000 apartments ready in 12 months in Noida against the need
for 70,000 apartments. Paras offered two projects at the exhibition,
Paras Tierea and Paras seasons in Noida and a commercial project, Paras
Trade Centre in Gurgaon. Traditionally, the Indian developers focused on
the local market. Of-late developers are waking up to the huge
potential of the untapped NRI market.

UAE based NRI’s are looking beyond the traditional Indian homes and
prefer well-developed and maintained communities that offer modern
amenities, leisure and entertainment opportunities within spacious and
secure environs. Focus is to strike a balance between luxury and
functionality.

Most of the visitors to the IndiaHome exhibition were looking for
second homes, holiday homes and retirement homes while the ones looking
at upgrading the living spaces of their parents back home, are equally
conscious of security. IndiaHome property exhibition addressed specific
needs of the UAE based NRI property investors. Effective in-person
interaction platform with the representatives of top-notch developers,
reputed for offering a global lifestyle and great living experiences,
showcased the best residential opportunities available across India.

Banks are getting tough with developers of
commercial projects such as office buildings, malls and shopping
centres—a fallout of the corporate loan scam that came to light last
year. Meanwhile, several large property developers have to repay loans
in the coming months. Builders seeking fresh loans have been asked to
meet more stringent conditions, including demands to produce five-year
lease agreements with tenants, and having to settle for considerably
lower borrowings against future rent receivables, two bankers said.

Indian Overseas Bank, for instance, will lend to developers only if
they produce a five-year leasing agreement with a lock-in period for
tenants. “This is what banks do at this moment,” said M. Narendra,
chairman and managing director of the public sector bank. “This way, you
can be sure of the repayment capacity of the borrower.” Banks grew wary
of lending to commercial real estate projects after several of them
turned sour during the slowdown and developers struggled to repay debt.
Their worries increased when in November the Central Bureau of
Investigation nabbed eight senior officials of state-owned banks and
other financial institutions for irregularities in lending to builders.

The Reserve Bank of India (RBI) had been warning banks even earlier
about the high-risk nature of realty, terming it a “sensitive sector”
along with capital markets and commodities because of likely price
fluctuations. Anand Gupta, honorary treasurer of Builders’ Association
of India, an industry body of construction contractors and builders,
said no new commercial real estate project has been launched in the past
couple of months. “Banks have not approved any fresh proposals in the
last one-two months,” he said. “Most banks are even hesitating to
release sanctioned money.” Bank loans constitute at least half of a
developer’s borrowings.

Already, starved of funds from this key source, developers are
turning to land sales, pre-sales from projects, rental income from
office buildings, institutional borrowings, and money from public share
sales to raise money, a majority of it to repay bank debt. “We have made
the process more stringent and are highly selective in choosing (real
estate) borrowers,” said the head of corporate banking at a state-run
bank. He did not want to be named. The executive said his bank has
sharply lowered the amount of loan given to even “good” borrowers in the
sector against future rent receivables.

“For instance, if the rent lease agreement produced by the developer
or owner for five years amounts to Rs.1 crore, we earlier used to give
some Rs.80 lakh against that. Now, this proportion has been brought down
to, say, Rs.50-60 lakh,” he pointed out. The exposure of Indian banks
to the real estate sector was about Rs.5.8 trillion on 31 March 2010,
accounting for nearly 17% of their advances. Of this, bankers estimate
around Rs.14,000 crore is repayable by the end of March. Property
analysts say in the wake of falling revenues, cash flow constraints and
tightening of bank lending, repayment will not be easy for developers.

“Since banks have stopped issuing fresh loans to the sector,
developers would resort to high-cost private equity money or refinance
debt,” said Parikshit Kandpal, analyst at brokerage firm Ambit Capital
Pvt. Ltd. “Essentially a lender’s market in the current scenario, we
will see bankers asking developers to pay up even if there is a
shortfall of 20-30%.” Kumar Gera, chairman of the Confederation of Real
Estate Developers’ Association of India, said bank lending to the real
estate sector is crucial. “If banks tighten lending, not only would it
up borrowing costs for developers, but it would impact the pricing of
the end-product,” he added.

India’s top developer DLF Ltd needs to repay around Rs.1,600 crore of
debt by 31 March. It repaid Rs.1,224 crore as of end-September with
money raised by selling land as well as stakes in its retail business,
according to numbers provided by the company after its second quarter
earnings. Its net debt now stands at Rs.19,000 crore. A DLF spokesperson
said the company would not comment because of the mandatory silent
period ahead of its quarterly results. Housing Development and
Infrastructure Ltd (HDIL) has to repay Rs.350 crore by March 2012, and
it intends to do so through large land sales and cash flows from its
residential transactions, said Hari Prakash Pandey, vice-president
(finance and investor relations).

HDIL, which recently sold its suburban Mumbai Popular Car Bazaar land
for Rs.800 crore, will use some of the sale proceeds to repay debt.
“Though we can actually prepay some of our debt with this money, the
macro challenge today is if we should hold on to cash or repay debt
considering tightened liquidity conditions that the sector is likely to
face,” said Pandey. Typically, advances to commercial real estate
projects form only a small part of a bank’s loan book due to the higher
risk weight for such lending. Even for residential property, a segment
that has fared relatively better, RBI announced a slew of measures in
its November policy, including a cap on the loan to value ratio at 80%
and a higher risk weight for loans above Rs.75 lakh at 125%. Banks
typically lend to commercial real estate projects at 13-14% on 5-10-year
tenures.

Property consultants are also worried about how the dozen-odd
developers who were looking to go public last year, but still haven’t,
will repay their debt. Mumbai-based Lodha Developers Ltd, which was
eyeing an initial public offering in 2009-10, has repaid only Rs.850
crore of the Rs.1,650 crore loan it took from Deutsche Bank AG in 2007.
Managing director Abhisheck Lodha said the company plans to repay the
remaining money in the next few months, largely through internal
accruals. “Even if some amount of refinancing of debt takes place,
developers will also try to restructure loans to borrow money from the
same lender, and that will be expensive,” said another property analyst,
who didn’t want to be named.

While revenues did not scale up substantially in the December
quarter, robust land purchases have led to increased borrowings. For
instance, Indiabulls Real Estate Ltd’s (IBREL) debt mounted by Rs.1,690
crore to Rs.3,340 crore on the back of aggressive land acquisition in
the fiscal third quarter, according to reports by brokerage firm Motilal
Oswal Securities Ltd.

After going through a downturn, the Indian retail
sector is likely to show positive results this year with several firms
witnessing buoyant sales, improved capital management and stable
margins, according to ratings agency Fitch. “Retailers in the country
are likely to benefit from buoyant sales, improved working capital
management and stable margins,” Fitch India said in its report ‘2011
Outlook: Indian Retail’. The retail sector had suffered massively during
the 2008-09 downturn with many firms closing stores and holding back on
expansion.

The report said the total debt is expected to increase in most cases
to fund growing capex requirements as companies focus on cementing their
market share and retail footprint. “However, debt levels are likely to
be supported by higher operating profits and consequently leverage
levels should remain stable and are likely to improve,” it said.
The agency also said it expects liquidity to remain comfortable, led by efficient working capital management.

“Improvements are expected from better inventory management and lower
lease deposit levels,” it added. Besides, retail firms are likely to
witness stable operating margins this year, depending on each company’s
choice on product category. “This, in addition to economies of scale,
private label sales mix and discounts from suppliers will help
strengthen margins,” the agency said. The report also said small
retailers and new entrants are likely to go more aggressive this year,
while large players are also likely to face lesser risk in executing
their expansion plans.

“Given the size and scale achieved by larger retailers such as PRIL
and Shopper’s, their capex execution risk has reduced considerably in
line with their reduced pace of expansion,” the report said.

US billionaire real estate developer Donald Trump
is entering the Indian property market with a luxury residential tower
in Mumbai, more than two years after announcing plans to expand in the
south Asian nation. Trump, who has joined with Mumbai developer Rohan
Lifescapes Pvt for his first venture in the country, expects to start
marketing the project by March, quoted Donald Trump Jr., Trump’s son and
executive vice president at the Trump Organization LLC in the report.

“We are doing a very luxury project with Rohan Lifescapes and we’ll
be in India later this quarter to launch it officially,” he added. He
declined to give further details on the project. The Trump development
is being built on the site of a former hospital in south Mumbai, in a
neighborhood dotted with jewelry stores, the only Porsche showroom in
the city and next to a Mercedes showroom, said two people familiar with
the matter, who declined to be identified before an official
announcement.

Rohan Lifescapes focuses primarily on redevelopments. It has more
than 60 projects spread across 54 sites, according to its website. It
has developed more than 20 million square feet of homes and offices and
is currently developing 3.45 million square feet of projects in Mumbai,
according to its website. “Our entry has to be in Mumbai and that’s
where everything is going on right now in terms of the high-end real
estate,” the younger Trump had said earlier. The billionaire has branded
buildings from skyscrapers in Manhattan to condominiums in Tijuana,
Mexico, Trump World in the South Korean capital Seoul and the Trump
Towers Istanbul.

The rate sensitive sector stocks - banking, real
estate and automobiles are in limelight on the bourses a day ahead of
the Reserve Bank of India (RBI) monetary policy review tomorrow, January
25. Most analysts are expecting a 25 basis points (bps) rate hike in
both the policy rates—repo and reverse repo. This will take the repo
rate, or the rate at which RBI infuses liquidity into the system, to
6.5%, and the reverse repo, or the rate at which the central bank drains
liquidity, to 5.5%. One basis point is one-hundredth of a percentage
point.

The banking shares have now rallied for six consecutive day after the
food inflation fell the second week in a row to 15.52% for the week
ended January 8, according to the official data released today. Food
inflation, having touched 18.32% for the week ended December 25, had
declined to 16.91% on January 1. The BSE, banking index, Bankex the
second largest gainer among sectoral indices today, has appreciated
almost 6% as compared with less than 2% rise in the benchmark index
Sensex in the last six days.

Among the individual stocks – State Bank of India, Axis Bank, Andhra
Bank, Bank of Baroda and Yes Bank from banking and HDIL, Mahindra
Lifespace and Sobha Developers from realty are trading higher by over 2%
on the BSE.

Real estate developers and consultants on Tuesday
said RBI’s decision to hike policy rates by 25 basis points will affect
the sentiment of the property market, but they do not foresee any major
impact on housing demand and prices. “The hike in repo and reverse repo
rates by 25 basis points will have a sentimental impact on demand, but
it may not slowdown the demand in its actuality,” Jones Lang LaSalle
India Chairman and Country Head Anuj Puri said.

Home buyers might delay their decision to own property, which would
prolong the completion of the transaction, Puri pointed out. On housing
prices, Puri said it would remain stable in the metro cities. Commenting
on the RBI’s policy, DLF Group executive director Rajeev Talwar said:
“The growth of economy is strong, so we do not expect any negative
impact on the property demand and prices”. Talwar said he did not forsee
any rise in interest rates. Parsvnath Developer chairman Pradeep Jain
said that there could be a short-term impact because of rate hikes but
would not have major affect on demand, which is directly related to
growth in the economy which is firm.

“As far as rate hike impact on real estate sector is concerned, I see
a short-term impact initially which is a normal and routine phenomenon.
In fact since March 2010, rates have been increased six times but it
has not impacted the demand and growth in the sector significantly,”
Jain said. Assotech managing director Sanjeev Srivastava said: “It was
expected. This will hurt the sentiments of the property market, but will
not have any major impact on demand as housing prices are competitive
in many markets including Noida.”

Talwar of DLF noted that the government needs to do much more on the
supply side to contain inflation. “The more you try to curb demand and
not increase housing supply, the prices would rise in long term”.

For a non-resident Indian NRI who has been away from home, there are many investment options across various categories. However, while other investment options can be timed, investments in real estate have to be planned well in advance, as time and costs overrun to acquire the property will be high. The input and labour costs are increasing.
While the short to medium-term investors can shop around for developed plots in order to hedge their bets, long-term investors should invariably look at apartments or villas depending on their family size and future requirements. A number of projects ranging from apartments to villas and penthouses are being launched at various locations across the city.

LIC Housing Finance Company, who Chief Executive was arrested by CBI on Wednesday on bribery charges for sanctioning loans, said that it had adhered to all rules while approving loans.
All procedures and due diligences consistent with Board approved guidelines have been adhered to in approving the loans, as has been followed in the past, by the Competent Authority, the company said in a statement.

Thanksgiving is a time to give thanks, a time for family and a time for scrumptious food. Given that this holiday usually focuses on the dinner table, why not grace your Thanksgiving table with a lovely centerpiece to include the holiday spirit? Here are a few ways you can incorporate the fall harvest colors and traditional symbols into your table decoration:
For all the crafty folks, you can create a table runner using camel (or another harvest color like red, green, orange or gold)-color wool flannel or felt. Cut the fabric to size with a pair of pinking shears. Lay coordinating ribbons along the center of the runner and secure with double-stick tape or a dab of fabric glue, if necessary. You can set any of the above mentioned centerpieces on top or a classic vase with fall colored flowers.

Although the holidays are a great time to get together with friends and family, the idea of hosting a gathering at your home can be a daunting task. There is a high appeal of having people over my house for the holidays, as I get to stay home and be comfortable in my own space.That being said, there is also a great deal of stress the surrounds it.Here are a few tips I have, and will be using, for hosting this holiday season:
Make a list: I am a huge list person. I like to jot down little to-do lists to keep me organized with the tasks I know I need to do. For Thanksgiving, I have already begun a list of items I need to pick up at the grocery store,decor items to bring out and, of course, the dreaded cleaning list! I feel that by writing down all that you need to accomplish, despite the lists length, it seems more manageable than just in my head.